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Feedback/Frequently Asked Questions

Feedback

Any feedback or comments on the Responsibility Center Management Budget Model or concerning this website may be directed to RCM@drexel.edu

Frequently Asked Questions

Why is Drexel changing to a new budget system?

As Drexel has grown in recent decades, its historical approach to budgeting has become misaligned with the institution’s increasing size and strategic aims. The incremental budget model, which simply rolls academic budgets forward year after year (adding or subtracting some small percent) does not necessarily align resources with expanding programs or strategic initiatives at either the College or University level. Recognizing the challenges that incremental budgeting presents to an institution as large and complex as the one into which Drexel has transformed, the University has recognized the need to shift to a more strategic approach to resource allocation.

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Why did we choose the RCM budget model over other budget models?

A number of model options were assessed by the Budget Redesign Steering Committee, including various iterations of formula funding, performance funding, and incentive-based (including RCM) models. Ultimately, an RCM model was identified as an optimal fit for Drexel’s culture, size, expected future growth and strategic aims. Primary benefits of an RCM model that ultimately led to its selection include, among other factors:

  • Increased transparency into budget decisions across the institution
  • Enhanced stewardship of funds from academic and administrative units
  • Promotion of entrepreneurial academic activities; incentives to grow revenue and enhance focus on interdisciplinary endeavors
  • Reliance on actual data (enrollments, research activity, etc.) to drive resource allocation decisions

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What involvement did the faculty senate have in moving to the RCM budget model?

The Faculty Senate has been represented in the budget redesign process since the project’s inception. The Faculty Senate Chair, as well as the Chair of the Senate’s Committee on Budget, Planning and Development both serve on the Budget Redesign Steering Committee, which meets regularly to oversee the model’s design process and weigh in on the most critical decisions surrounding any new processes and/or policy that may impact model dynamics. Further, the Senate Committee on Academic Affairs has worked collaboratively with the various RCM committees throughout the design/implementation process to ensure that academic perspectives inform all relevant decisions.

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What is a Primary Unit?

Primary Units are units that have substantial ability to influence revenue generation through credit hour production or other means. These units generally provide instruction (e.g. schools and colleges) or are auxiliary units with revenue generating capabilities.

What is an Administrative & Support (A&S) unit?

A&S Units are University units that have limited ability to influence revenue generation. They generally provide support services (such as Enrollment Management or Facilities) to revenue-generating units. Leaders within these units are primarily held accountable for managing expenses and providing optimal service levels.

How does the model encourage interdisciplinary academic endeavors?

The model allocates tuition dollars according to a credit hour algorithm, such that the College/School that instructs a course and the College/School where a student resides both receive a share of revenue. Accordingly, interdisciplinary programs are promoted in that Colleges can analyze the financial implications of creating programs that involve collaboration with other Schools. This data-driven approach thus encourages collaborative planning, as it can illustrate clearly the bottom-line impact of offering interdisciplinary programs, which are often mutually beneficial for the two (or more) Colleges involved.

How does the model impact faculty hiring?

New faculty hires must be approved by the Executive Budget Committee (comprised of the President, Provost, and EVP for Finance, Treasurer, and COO), and this group maintains authority to approve searches, salary start-up figures and contract language. Aside from demonstrating a potential faculty hire’s academic credentials, Colleges should prepare “business cases” that outline all relevant financial projections (both revenue and expense) related to the hire. The Provost’s Office will continue to provide start-up cost support—in line with its historical practice—the degree of which will be determined by the institution’s strategic priorities and financial circumstances at the time of the hire, but the new hire’s salary should at least eventually be funded entirely by a College’s own resources.

How are sponsored revenues treated in the RCM model?

Revenues from grants and contracts (including indirect cost recoveries) flow to the Primary Units responsible for their generation. Grants with co-investigators across Primary Units see direct and indirect revenues flow to the multiple Primary Units in appropriate proportion. Primary Units are allocated indirect costs associated with research, so it is important that these revenues align with those costs. Beyond the direct allocation of sponsored revenues and indirect cost recovery, a “research subsidy,” generated from an earmarked pool of tuition dollars, is also provided to Primary Units conducting research in proportion to their share of total University sponsored revenues, with the goal of incenting further research and providing additional financial support for indirect costs incurred.

How does the central administration retain control over the University’s strategic direction under a decentralized budget model?

Drexel’s redesigned model requires that all Primary Units pay a participation fee of 17% of their revenues (excluding direct research, gifts, and endowments) into a centrally managed subvention, or “One University” Fund. The President, Provost, and EVP for Finance, Treasurer, and COO have control over this pool of revenue and use it for strategic initiatives, which may include subsidization of Primary Units or injection of funds into units for various new endeavors.

How will the integrity of academic programs and course offerings be maintained under RCM?

One of multiple model governance committees, the Senate Committee on Academic Affairs (SCAA), working together with the Office of the Provost, is tasked with monitoring course and curriculum development across the institution and ensuring that all programmatic decisions are made with good intent. Incentive-based models do run the risk of some “gaming” for financial benefit if proper checks and controls are not in place, and this Committee should serve to hedge against such activity. Any courses that appear to be proposed for solely financial gain (e.g., “English for Engineers”) should not be approved. Of course, if a College legitimately believes it should offer a lower level course that may seem redundant, it will have the opportunity to present a case to this Committee and earn approval if the argument for its creation is sound.

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How are Centers & Institutes treated in the RCM model?

Units that exist as interdisciplinary research centers with unique revenues (mostly grants) and costs that exist independently of a specific College or School are defined as Centers & Institutes under the RCM model, and are treated as Primary Units (allocated revenues and indirect costs). Examples include the A.J. Drexel Autism Institute and the ExCiTe Center.

How are Drexel Network programs treated in the RCM model?

The Drexel Network consists of the academic programs delivered at physical locations outside Philadelphia that provide undergraduate degree completion and/or graduate coursework. Each satellite campus, such as Sacramento or Burlington County, is considered a unique Primary Unit within the model, and is allocated revenues and costs accordingly. After a five year “incubation period,” Network programs will be evaluated as needed in the future and will be rolled into their respective Colleges’ financials if they are deemed successful at that time.

What are some of the “drivers” used to allocate revenues and costs to the Primary Units in the model?

Primary Units are allocated undergraduate tuition revenues based on an algorithm that considers both the percent of student credit hours that they instruct and the percent of student credit hours that their enrolled students take. Allocable student fees are distributed based on Primary Units’ share of Student FTEs. On the expense side, many administrative unit costs are allocated to the Primary Units based on the relative size of their direct expenditure budgets (e.g., if the College of Arts and Sciences has 10% of Primary Unit expenses, it is allocated 10% of the Office of Finance’s costs). The Provost’s Office costs are allocated based on Primary Units’ share of Student FTEs, and Facilities costs are allocated according to the Units’ share of both gross square footage occupied and direct expenditures.

How does the redesigned model impact expense budgeting?

For the most part, treatment of direct expenditures in the redesigned model will not differ from the historical methodology, with the important caveat that an all-funds approach must now be utilized. So, while Primary Units are accustomed to budgeting for and managing unrestricted expenditures, they will now be assigned costs related to restricted and sponsored funds (though they will receive allocations for revenues associated with these funds as well).

How are the Administrative & Support Units held accountable for service levels and costs, which are now “paid for” by the Primary Units?

As part of the annual budget process, the A&S Allocation Committee (whose membership includes Deans and Faculty) will evaluate the financial plans proposed by the administrative and support units. These financial plans should outline the proposed cost pool budget and will include justifications for additions or changes to their service and fee structure. The committee will review these proposals and, if not satisfied with services or costs, develop recommendations that focus on identifying the level of funding required for an administrative unit to efficiently provide the type and quality of service desired by the university community.

What are some common examples of institutional improvements sparked through implementation of RCM models?

  • An enhanced focus on revenue growth at the College/School-level. Deans will quickly realize that growth of revenues through utilization of a greatly increased mix of financial levers (undergraduate and graduate programming, grants and contracts, fundraising, etc.) results in increased budgets.
  • Growth of the institutional research portfolio. Use of some undergraduate tuition dollars for a “research subsidy” serves as a strong incentive for Colleges to grow their research portfolios, and rewards them even further to seek out grants that pay full recovery rates. As the research subsidy is offered in full regardless of the recovery rate on sponsored revenue streams, grants that pay full recovery represent significantly positive bottom-line contributions to academic units and research centers. Further, charging faculty salaries and other substantial costs to grants can free up unrestricted dollars for further investment in growth of the academic enterprise.
  • Stronger academic control of direct expenditures. While the focus on revenues will be the most significant change in budget philosophy, a more keen awareness of expenditures should also develop across the institution. Colleges should no longer budget expenditures simply because they have in the past. Each year, a strategic approach to budgeting should be considered and any historical direct expenditures that are not critical to the mission of the College or institution should be seriously examined and potentially removed from budgets. The resultant savings will fall to the bottom line of the units and thus result in improved margins and opportunity for new investments.
  • Continuous improvement of administrative operations. The redesigned model offers greatly enhanced transparency into administrative costs, so Deans and other academic stakeholders will become more naturally aware, and perhaps critical of service levels offered by these units. Accordingly, these “consumers” will demand improvement when service and/or costs appear to be unreasonable or misaligned. This feedback loop places pressure on the administrative units to continue to innovate, improve, and better serve the University community.

What can faculty do if they have questions or need more information?

Contact rcm@drexel.edu for more information.